Rainbow Tourism Group Limited v JJ and BB (Private) Limited

In 2006, the appellant (Rainbow Tourism Group Limited) and respondent (JJ and BB (Private) Limited) entered into a written lease agreement for premises at Number 1 Pennefather Avenue, White House Complex, Rainbow Towers, Harare. After the written lease expired, the respondent remained in occupation as a statutory tenant under the same terms. On 11 September 2014, the appellant sued for ejectment and payment of arrear rentals totaling USD 4,965.02 as at 30 June 2014, alleging breach of the lease agreement due to non-payment of rentals. The respondent denied breach, claiming it had effected improvements to the property for which the appellant had agreed to compensate it, and that parties had agreed to set off the improvement costs (USD 7,788.00) against rental arrears. The respondent counterclaimed for USD 7,788.00. The magistrate's court granted judgment for the appellant in the sum of USD 877.00 (being the balance after set-off) with interest at 5%, finding that both claims were legitimate and that the respondent had not breached the lease agreement as parties were negotiating a set-off.

• Whether the respondent was in breach of the lease agreement by failing to pay rentals
• Whether the parties had agreed to a set-off arrangement for improvements effected by the respondent
• Whether the respondent proved its counterclaim for compensation for improvements
• Whether the lease agreement had been varied to entitle the respondent to compensation for improvements despite an express clause to the contrary
• What rate of interest should apply to arrear rentals
• Whether costs should be awarded on a legal practitioner-client scale

The appeal was allowed with costs. The magistrate's judgment was set aside and substituted with an order: (1) ejecting the defendant from the premises; (2) directing payment of USD 8,665.46 in arrear rentals as at 28 February 2016 plus ongoing rentals at USD 151.55 per month until vacation; (3) ordering interest at the prescribed rate of 5% per annum from 11 September 2014 until final payment; (4) dismissing the defendant's counterclaim with costs; and (5) ordering the respondent to pay costs of suit on the general scale.

The binding legal principles established are: (1) A tenant has an undisputed obligation to pay rentals for leased property - this is the sine qua non for continued occupation, and the tenant has no right to occupy premises save in return for payment of rent. (2) A claim against the landlord does not absolve the tenant from complying with its obligation to pay rent. (3) For the common law doctrine of set-off (compensatio) to operate, two basic requirements must be met: (a) the parties must be mutually indebted to each other, and (b) both debts must be liquidated and fully due. The defendant must be able to say "the plaintiff owes me a debt" rather than "I have a claim against him", and the debt must be capable of easy and speedy proof. (4) Courts cannot rewrite contracts entered into between parties or read into a contract implied or tacit terms that are in direct conflict with its express terms - this is a matter of public policy. (5) Where a lease agreement expressly provides that the lessee cannot claim compensation for improvements, the lessee bears the onus of proving any variation of that term.

The court made several non-binding observations: (1) On costs on a higher scale: such awards should be used sparingly lest they discourage litigants who, albeit ill-advised, genuinely believe they have a cause to defend an action. Costs on a legal practitioner-client scale are appropriate only where a party was acting dishonestly, maliciously, or pursuing vexatious or frivolous proceedings. (2) The court noted it could only surmise why the magistrate did not award costs, as the judgment was silent on reasons, but suggested it may have been because both parties were found successful in their claims. (3) The court observed that in the absence of consensus on the interest rate and without the written lease agreement being tendered into evidence, it was within the magistrate's discretion to apply the prescribed rate, and the appellant bore the burden of proving any higher contractual rate claimed. (4) The court noted that the differences between the sums claimed in the counterclaim and those in documentary evidence "only served to compound the respondent's quandary" and discredit the respondent's evidence on the nature and extent of improvements.

This case is significant in Zimbabwean contract and landlord-tenant law for clarifying several important principles: (1) It reinforces that a tenant cannot unilaterally withhold rental payments even where it has a claim against the landlord - the obligation to pay rent is the sine qua non for continued occupation. (2) It articulates the requirements for the common law doctrine of set-off (compensatio), requiring mutual debts that are liquidated and fully due, with the debt being capable of easy and speedy proof. (3) It emphasizes that courts cannot rewrite contracts or read in implied terms contrary to express contractual provisions, reinforcing freedom of contract principles. (4) It demonstrates the evidential burden on a party claiming set-off or variation of contractual terms, requiring clear proof of agreement and quantum. (5) It provides guidance on when costs on a higher scale are appropriate, indicating such awards should be used sparingly and only in cases of abuse of process, dishonest conduct, or vexatious/frivolous proceedings.